US dollar: Long-term players brace for decline

The Commodity Futures Trading Commission (CFTC) COT (Commitments of Traders) reports for the week ending on Tuesday, October 6th, were released by the CFTC.

Non-commercial large speculators increased their net buy position on the dollar index by 0.9 thousand contracts to 14.9 thousand for the second week in a row, and for 4 weeks out of the last 5. This is the highest net position since January 31st.

Hedger operators have slightly decreased their net sell position on dollar index contracts by 0.1k contracts, bringing it down to 16.6k. This follows a period of almost 4 weeks in which the net position was steadily increasing, reaching its peak on March 21.

The number of open contracts decreased by 4.7 thousand, bringing the total to 27.3 thousand.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators increased by 0.77 over the week, bringing it up to 3.43.

The latest COT report data on the dollar index (USDX) shows that large speculators have been exhibiting bullish sentiment on the US currency. Over the past month, large funds have been steadily increasing their net position in favor of the dollar, and this net position has now reached its highest level in almost 5 months. If this trend continues, it could lead to further appreciation of the US dollar.

Hedgers, who trade for the longer-term, are becoming increasingly bearish on the dollar. They have ceased to increase their net position for USD growth. If large speculators join them in the coming week, the dollar could experience a downward momentum.

The data from the previous report may be significantly skewed due to the quarterly expiration of currency futures. Therefore, the data from the upcoming report, to be released in a week, will be more indicative.

COT report data is essential for medium and long-term trading, and is mainly used by large speculators, NON-COMMERCIAL (banks, investment funds). These traders usually follow the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, however, have little impact on the market (red line). Hedgers, COMMERCIAL (operators, large companies) usually go against the trend (black line). The net position is the difference between the number of buy and sell contracts, while open interest is the total of all open positions in the market.